Skip to main content

Step Right Up, Give the Indexes Your Best Shot

Here's why we need a big whack to shake things up.

The Market

The either/or market remains intact.

Sure, it is interspersed with a few days of chop, where nothing goes anywhere, but on days when they go, it’s one group or the other.

I prefer days where breadth beats the indexes and, despite all those non-mega-cap stocks that rallied today, breadth was not terribly good. I mean, the McClellan Summation Index continues to sit there like it needs a poke, because it can’t go up and it can’t go down.

The chart is shown below.

And, once again, stocks making new highs have lagged, while stocks making new lows has increased. Sure, Nasdaq was down today, but there should not be 110 stocks making new lows when the market is at the highs. Especially when there are only 130 new highs.

Image placeholder title

To that, I say give us a whack in the indexes. Why? It will show us how much selling has already happened in the non-mega-cap names. Or it should.

For example, the banks have been winners this week. But take a look at JP Morgan (JPM) - Get Free Report. It had that nice breakout and now is at some resistance. What it ought to do is shuffle around here a bit, back off, digest the gain and rally again. A whack in the market should show us a stock like this holding into a pullback.

Image placeholder title

Or, what about my new friends the Transports? They got halted right near the downtrend line. I would love to see them cross it (using iShares Transportation exchange-traded fund (IYT) - Get Free Report in this case) and fill that gap around $256-$257, and then do some backing and filling.

Image placeholder title

I believe Energy Select Sector SPDR (XLE) - Get Free Report would rather get up and over that little resistance line, and as long as it stays over $48 that remains the base case.

Image placeholder title

So why should we pullback?

That daily sentiment index for the Volatility Index is now at 10. That typically means we’ve got some volatility coming our way.

One final note on the bonds, they are getting a bit short-term oversold, as I noted yesterday, so I do think we could see a bounce. Tomorrow is the consumer price index read, so it will be interesting to see the response to that release.

New Ideas

I think you should be aware of this uptrend line for the PowerShares QQQ Trust (QQQ:Nasdaq). If bonds do bounce tomorrow the QQQs should enjoy some sort of rally. But in any event, if I am correct that mega-cap tech is ready to take a back seat for a while this line should break in the next few weeks.

Image placeholder title

I spotted one of my favorite patterns on the chart of Toll Brothers (TOL) - Get Free Report, a head- and-shoulders bottom. If I am correct and this should get through $60.

Image placeholder title

Today’s Indicator

The McClellan Summation Index is discussed in full above.

Image placeholder title

Q&A/Reader’s Feedback

Helene welcomes your questions about Top Stocks and her charting strategy and techniques. Please send an email directly to Helene with your questions. However, please remember that TheStreet.com Top Stocks is not intended to provide personalized investment advice. Email Helene here.

Poor Merck (MRK) - Get Free Report can’t catch a break, but I see so much support in this $74-$75 area that if you have patience I think that’s where you can buy some. As we have discussed previously, it has a very long base but as we know from Pfizer (PFE) - Get Free Report, sometimes those bases take forever to finally work.

Image placeholder title

The question is if we can like Raytheon (RTX) - Get Free Report again. I’ll go with yes, but it might take a little while to fully develop. A breakout over 90 would be obvious, but keep in mind that the 90/100 rule would go into effect. The 90/100 rule is that 90% of the stocks that go to $90 will go to $100.

Image placeholder title

I was asked about Ford (F) - Get Free Report in early July, and I was of the mind that the stock would be buyable in the $13.75 area. That lasted a day or two before it came down again. But in reality this mid-$13 area is good support. As long as it can hold this area, I would say it is probably 50-60% through curling under.

Image placeholder title
High on Tech

High on Tech

Let's check sentiment, why you shouldn't trust any bounce from the producer price index number, and what the heck is up with those put/call ratios?

Bond Relief

Bond Relief

Here's why bonds could use a little respite as they were the only thing to really move today. Also, let's look at sentiment and McDonald's.

Breaking Bank

Breaking Bank

Suddenly everyone noticed the banks are not so hot. Also, let's look at new lows, energy and Exxon, and ... vomiting camels ...

A Rally Last Week? What Rally?

A Rally Last Week? What Rally?

It's almost like what happened last week never happened. Also, let's check the indicators, the overbought reading, energy, transports and ... Tesla.